A one-period tontine is a collective investment fund in which every participant enters with an initial contribution, but only those participants who are still alive at maturity are entitled to receive a share of the total fund value. A vast literature proposes various sharing rules using as a main criterion the actuarial fairness of the payout, i.e., the sharing is done in such a manner that participants have the same (unconditional) expected return. We revisit this point and suggest alternative sharing rules that aim at being better suited to investors. Specifically, we discuss how to share mortality risk using as a fairness criterion equality in expected utility among participants. A main finding is that we show that in a competitive market only (asymptotically) actuarially fair tontines are viable.

This is joint work with Marco Feliciangeli (Vrije Universiteit Brussel) and Steven Vanduffel (Vrije Universiteit Brussel).